Summit: Mentor Graphics Revenue Stream Increasingly Predictable

Mentor Graphics Corp (NASDAQ: MENT) increasingly predictable revenue stream should drive its shares higher, an analyst said Friday.

The supplier of electronic design automation tools recently beat Wall Street's third-quarter earnings expectations, but offered a disappointing fourth-quarter outlook.

Summit's Srini Sundararajan reiterated a Buy rating but trimmed his target slightly to $30.

"Revenue is becoming more predictable," Sundararajan said, suggesting this should improve the company's price-to-earnings ratio.

"And it doesn't hurt that Carl Icahn continues to own shares," Sundararajan said.

Icahn disclosed recently that his 16.1 million stake in Mentor was unchanged during the third quarter. The company has about 113.68 million shares outstanding.

"A consolidation in the industry is a possibility Icahn would likely welcome," Sundararajan said.

Mentor says its only two significant competitors are Synopsys Inc. and Cadence Design Systems Inc.

Perhaps inspired by Icahn, Sundararajan took a swipe at Mentor's management for failing to expand the business beyond design automation.

"It's a pity that the talented senior management are being paid well for their conservativeness, and not for being imaginative and revolutionary," Sundararajan said.